Ep. 379: Implementing K–12 Education Savings Accounts – With Mike McShane

July 11, 2023

John Kristof talks with Mike McShane about his new report with Nicole Stelle Garnett at the Manhattan Institute titled, Implementing K–12 Education Savings Accounts Is Really Simple. They talk about the new wave of school choice and the expansion of education savings accounts across the country.

John Kristof: Hello and welcome to another edition of EdChoice Chats. I am John Kristof, senior research Analyst at EdChoice, and joining me today on the other side of the proverbial microphone is Mike McShane, Director of National Research at EdChoice. Today, we are talking about his new report at the Manhattan Institute with Nicole Stelle Garnett. If you are interested at all in the new wave of school choice and the expansion of education savings accounts across the country, you are going to be very interested in today’s podcast, particularly because it is all about implementing all these programs that have been passed this year and some older programs as well. 

As Mike and Nicole argue in the paper, the legislation is one small part of the overall school choice landscape. With that in mind, Mike, I’ll just set you up with a very general question, go into a little bit of detail what questions you and Nicole were trying to answer in this paper. What was the impetus? 

Mike McShane: The main goal of this paper, and it’s great to be talking with you, John. It’s great to see you hosting now. I feel like I’m the guy at the factory who’s training his replacement, but doesn’t quite realize it yet, where it’s just like, “Oh no. No. You put this widget into this thing. Oh yeah, you’ve got it. Oh man, you’re really good at this. Wait, what’s that? I’m being called to the manager’s office?” But anyway, the whole point of this paper was if you study public policy, political science and all, you recognize that when laws get passed or new programs get instituted, that’s not even half the battle of actually accomplishing whatever these policies set out to do. 

Unfortunately, I think particularly in education policy, though not exclusively, this takes place across all sorts of different areas, we’re really bad at what happens next. It’s really fun to be a political advocate and to argue with people and to write op-eds and to organize and hold rallies, whatever. And then the law gets passed and it’s like, all right, donezo. Let’s move on to the next thing, move on to the next state or move on to the next program or whatever. You realize that it’s like, oh, whoa, wait a second, this thing actually has to happen now. And roughly, this all falls under the term of implementation. 

Now, again, I think implementation is a word that is often used to excuse all manner of sins and it’s a catchall, oh no, everything was perfect, but it just fell apart in implementation. I think that’s a terrible excuse and people shouldn’t rely on it. The purpose of this paper was to outline some of the key decisions that need to be made, the key fault lines, the key issues really in the next 12 to 18 months of the wave of education savings accounts programs that have been passed in the last year and the few programs that were there in the years before. 

What are the decisions that need to be made? What are the processes that need to be created? Who are the people that we need to get involved, and what do they need to do to make sure that these programs aren’t just words on a page but are actually created, thrive, and connect families with educational providers so that their kids can have a great education? 

John Kristof: Yeah, that’s perfect. I’m obviously hyping a little bit, but it’s for a reason. It’s not just because I’m here today. This is the paper that needs to exist if we’re going to have really productive discussions about how to actually use these education savings accounts. We are creating a new government program after all essentially, and so we need to figure out how we’re going to do that. As far as how that happens and some of the decisions that need to be made, I would say you and Nicole divide these different decisions and topics into I would say four general categories. 

I think you referenced those four general categories in the accompanying op-ed that you wrote in the 74 about this, presuming I’ve got those categories right. Do you want to go through just as an overview, because then we can go into more detail later, what those different kinds of decisions are? 

Mike McShane: For sure. It’s parents, it’s schools, it’s sort of regulations, policies and procedures, and then it’s legal. I think actually in the paper we break up regulations and policies and procedures, but they’re all kind of similar to another. I think that’s our four. Parents and what needs to be done to get them hooked up into this. Schools, same thing, what needs to be done to get them involved. Then the types of regulations, policies and procedures that need to be created. And then finally, some of the legal issues that have already arisen or will continue to arise and how states can deal with them. 

John Kristof: Perfect. Let’s start by talking about parents’ issues first. I guess in part, I’ll cue EdChoice for in a little bit here, in that this is something that we’ve been on for a while and something that we have been very active in trying to help parents actually understand what options exist in their states and provide trainings and programming like that to help. But we’re one part in an ecosystem. Could you talk a little bit about how parents can get involved? 

I guess I’ll say maybe you can push back to maybe one sentiment that I think exists implicitly in much of the education choice space, which is if parents know best and what we just need to do is give parents the legal ability to take their child to whatever schools they need to, then all we need to do is just get this legal victory done and then parents will figure out the rest. I’m basically bleeding a little bit here, but you wrote the paper. What is missing from that equation with that perspective? 

Mike McShane: The sort of if you build it, they will come vibe. I think it’s particularly important. Obviously, we work in EdChoice. We’re the intellectual inheritors of Milton and Rose Friedman, some of the greatest evangelists for free markets. I think it’s particularly incumbent upon us to continue to explain to people that markets are not magic, right? That markets actually need other things around them so that they can work. Step out of education. Say you just want to start a business. Well, you need things like, I don’t know, the rule of law. You can’t just have someone come in and say, “Hey, I’m building, I don’t know, a used tire shop,” or whatever. 

But every day at the end of the day, someone can come in and just take all the money that I made. Well, it doesn’t matter. You could have a great used tire shop. But if you don’t have things like that, the ability to draft contracts and venues in which you can adjudicate those things, these are the things that make the market work. I think, like I said, it’s incumbent upon us to say the same thing is true in education. What we’re trying to do here is to create an educational marketplace, but marketplaces have a whole bunch of other stuff that intersects with them. When we want them to work and work better, we need to invest the time and energy to make sure that those types of things are happening. 

Parents are a perfect example. We want to create these programs to give these opportunities for parents, but it doesn’t just magically appear in their heads when we’ve created one of these programs that they are even eligible for them. We at EdChoice have done polling in the past where we asked people that are in states or that are even eligible for programs, hey, did you know this program exists? Do you know that you’re eligible for it? And lots of families don’t. On a basic level, ways of educating parents that they know what they’re eligible for and what to participate in. And then it’s also worth noting that education savings accounts programs are complicated. 

They’re much more complicated than even vouchers or tax credit scholarships where you’re basically exchanging a coupon for one education. You just have to pick one provider and that’s where all of your money goes. The whole beauty of ESAs is you can choose from multiple providers, but that multiplies the number of decisions that you need to make. I don’t think it’s unreasonable to say parents might need a little help with that. Part of it is on the side of just knowing how to participate in the program. Where do they get signed up? How do they navigate whatever platforms, which we’ll probably talk about more in a second, the platforms that states create so that they can actually spend their ESA money? 

But then also, how do they know all the options that are available to them within that platform? How do they get information about which ones they might like or what they might not like? And then how do they make sure that they don’t run afoul of any of the rules or regulations that are there, that they’re only spending money on approved educational items and not unapproved items? Some of these stuff that sit at the edges might not necessarily be clear. 

I think it’s really important for states and for other nonprofits and organizations that are getting involved in this to work with parents to make sure that they’re doing what they’re supposed to do and that they know what they’re able to participate in. 

John Kristof: Yeah, that’s great. I mean, you brought up Milton and Rose Friedman at the beginning and basic economics. You take an introduction to economics course. When you learn about markets, one of the key assumptions that is always there is in those basic models, there’s an assumption of perfect information and that everyone involved in a transaction knows the same amount as each other and that they know all information about the goods themselves and all that kind of thing. 

If you’re going to have a good education market, if that’s what ESAs are moving toward, the more information that is easily accessible, the better, the better it will work, the better decisions can be made, and the happier families will be and the more children will go. All of those kinds of things. I mean, I think that’s a really important category to start out with. That’s kind of like the demand side of the equation a little bit as long as we’re going to keep talking about markets here. 

You also spend a good amount of time talking about how schools can adapt or rethink how they’re providing education services or what education services they can provide in a world with education savings accounts. Could you talk a little bit more about the schools, education side here? 

Mike McShane: Part of what we wanted to really impress upon schools, though folks that are involved in the school choice movement probably know this already, it’s just what a tremendous opportunity this is. Nicole and I both have strong connections to Notre Dame. She teaches in the law program there. I’m a graduate of the ACE program, which is a teacher preparation program for Catholic school teachers. We’ve seen the numbers of dwindling Catholic schools and others. She did that great book with Meg Brinig, Lost Classroom, Lost Community. It shows how devastating the impact of closing catholic schools is. 

At the outset, it’s just like this is a tremendous opportunity. Schools should get involved in this. We do write about that it’s important that they guard their key autonomies and key freedoms, and actually a lot of these bills have strong religious liberty protections in them that a lot of schools don’t know about. Some schools are worried about participating. Will it impede on their key autonomies? Much of that is taken care of in these bills. Folks should definitely check that out. But then you’re right, a lot of what we talk about is that there are opportunities to rethink the education that gets delivered. 

We give some examples of schools, not even with ESA programs, but just in general, offering hybrid or a la carte options because of the nature of these ESAs where people can divide up funds. Maybe these schools might be interested in saying, hey, we’re actually going to offer a part-time enrollment option, or you can just take one of our courses. If you just want to take our math classes, or if you just want to take our history classes or whatever, that’s cool. They want to create online options. But there’s just lots of opportunities for entrepreneurial school leaders because of the subdivided nature of this funding to offer things other than just a one-stop shop complete educational experience for students. 

John Kristof: Yeah, that’s great. A lot of the discussion is about one, and we’ll talk about the policy side of things in a second, but making sure that schools can feel comfortable operating in the kind of space that ESAs are providing. But there’s also discussions of things that schools can do that maybe they’re not. You talk about at least two things that I recall. One being discussions of a hybrid approach to education. If you listen to our polling podcast, that hybrid options is actually a very appealing option to parents. Hybrid approaches, as you talked a little bit about, taking one class or another. 

You also talk about price transparency, which is a discussion that I have not heard very much at all in education savings accounts discussions about how schools can participate there. If you feel like you’ve said what you needed to say about hybrid option, that’s cool, but I was wondering if you could add anything about price transparency and how schools can help information in that side of things. 

Mike McShane: Building off of talking about these hybrid options and saying, hey, listen, maybe a school doesn’t want to offer or offers in addition to their full-time options if you just want to take our math class or if you want to go one day a week or whatever. Part of the way these ESA programs can work well is if people can make, as you brought up the information issues, can make informed decisions and can say, “Hey, look, this school is offering math for $400 a semester. This school is offering math for $800 a semester,” and then make the decision. “Hey, is this one twice as good as the other one?” 

All of the complicated things that go into prices. Maybe it’s more convenient, or maybe it’s higher quality, or maybe it’s more aligned, whatever. I think that that’s going to be really important. If we want these programs to work better, parents need information and probably the best information that they can get is prices. I think there may actually be a role on the regulatory side about some transparency or uniform way in which providers should report their prices. It doesn’t bother me. I don’t think it’s a huge overstep to say, hey, listen, if you’re going to participate in this program, you need to tell people how much your stuff costs. 

You can’t have hidden costs, because people could have their ESA and they could spend all the money and only to find out later that they have to pay more. Creating simple transparent ways for educational providers to make it very clear to parents what they’re going to be charging them I think is just good for the marketplace. Look, it’s better if the schools do it voluntarily. But if we run into a position where they’re not doing that, I think that really runs a serious risk for the program. It’s fine to say, hey, listen, we need to create a uniform way of reporting costs. 

John Kristof: Yeah, definitely. Price transparency I think is a bit of a hot button topic in actually a lot of different policy areas right now. 

Mike McShane: Oh, for sure. 

John Kristof: There’s really no reason to not be considering it on the front end of education savings accounts issues. Again, if we want schools to participate and families to participate, we need to provide a structure that actually allows them to coordinate and provide and take services. Speaking of policy side of things, let’s move to the government end of the spectrum a little bit. This honestly probably could be its own topic of discussion. I’ve spent my own time in a life before education policy specifically interested in the public choice side of things and public administration. I know that there are a lot of challenges when you try to implement any government program. 

There’s lots of different incentives at play. The more actors who need to be involved in making something happen, the more chances that something can go a little bit more inefficiently than anticipated. It’s not guaranteed to be a smooth-running ship when you create a government program like an education savings account. Can you talk a little bit about what you and Nicole identify as some of the most important things to consider as governments are doing rulemaking, setting up the actual management of the program? Basically, how does this thing get maintained in the long term? 

Mike McShane: Think about it now. I mean, in the very immediate term, states need to make some pretty important decisions around things as basic as terms that we are using. For example, the term curriculum. So much of ESA programs rotates around this idea of curriculum. Whether you’re buying instructional technologies, which by the way is another term that probably needs to be defined, or textbooks or any resources, they’re all connected to a curriculum. If there’s ever any question of why did this family purchase this particular item, they keep going back to, well, this is the curriculum that the family is following. 

But what is a curriculum? What classifies as a curriculum? What qualifies as that? And therefore, grants status to all of the other things that families are doing related to it. That’s just one tiny example of states have to come down and say, here’s how we’re going to define what a curriculum is. That takes place in a rulemaking process that needs to be done by the state. Because not only if that problem isn’t hairy enough of saying what is a curriculum, really the question that has to be asked before that is who gets to decide what that definition is and who gets input on that and when can that be revised. 

Is that going to be your state board of education? Is that someone within your state department of education? Is it someone in your state treasurer’s office or whoever’s figuring these types of things out? Key decisions have to be made now around the who, who is making the decisions, the what, like what is the actual substance of these decisions, and then we can get into it. Because once these general rules get made around, like I said, setting particular definitions, other things around program management, then policies and procedures get drafted to actually implement those. 

If we think about the chain here, law gets passed, which is pretty bare bones, rulemaking adds more, I don’t know, muscle onto the bones, but it’s not really a completed creature. We’ll make it an animal, skin and fur and teeth and eyes and whatever. That doesn’t show up until the policies and procedures show up. We’re in that earlier stage here where these key questions have to get asked and when we have to decide this. The big picture here is that school choice advocates, educational choice advocates, folks that work in our organization or that work in organizations similar to ours, we need to be super vigilant. 

Because if we get that wrong and states pick bad people to make these kinds of decisions or create structures where it’s like we are going to basically set in stone what some of these terms mean, that could be really bad for these programs going forward. We need to be really thoughtful about that, because seemingly minor decisions could have massive ramifications in what parents are able to choose what schools choose to participate, or what educational providers choose to participate, how they’re regulated, et cetera. 

John Kristof: Exactly. Because there is a lot at stake with that question, in that if rules get defined and terms get defined in a way that in practice is just either not appealing to families or providers or is too confusing to families and providers, I’ll just focus on the confusion part, if it’s not clear for a long enough period of time what applies and what doesn’t apply, there’s a cost to taking that risk of trying to get involved in something. There’s a cost to risk. 

If it gets challenged or something winds up going wrong, then you as a provider or a parent, then you’ve caused some disruption for yourself and you don’t have what you were looking for by participating in the program in the first place. Probably makes you less likely to participate in the first place, is what I’m getting at. If that happens, if you have a confusing or hostile regulatory environment and people don’t want to participate, then you really know better off than you were before the legislation was passed. 

Mike McShane: No, that’s a super important point and I think it’s worth dwelling on and emphasizing, which is like, I don’t think that parents are going to give multiple bites at the apple at this. Part of this is like you were saying on the regulatory side, part of it’s just on the nuts and bolts. Think of yourself how many times some new website or new program or whatever wants you to use it, and then you try and log in on your phone and it doesn’t work. You don’t give it an infinite number of tries. At some point you just say, these people don’t have their act together. 

I tend to think like, hey, if this doesn’t work, I can’t imagine this thing is actually going to be any good. I don’t think parents are going to say, oh, we’ll try 10 or 15 times if we can’t log into the platform, if we can’t get signed up, or we have to keep resubmitting documents or whatever. They’re just not going to keep doing it. Again, that’s something we should be really thoughtful about because we don’t have unlimited runway here. Parents might only give us a couple shots. Any problems or glitches or whatever need to get worked out quickly. 

John Kristof: Definitely. Some of this is on a technical side of things as well, and it’s moving into a bit of another category that you’ve got in the report. This happened to me yesterday. Maybe this is too long of a diatribe. If you live in a city, you’ve probably seen these little electric scooters that you can rent. 

Mike McShane: Of course. 

John Kristof: There’s several brands now, and there’s a new one that was introduced to my market where I’m at and the app just didn’t cooperate. And before very long at all, I just gave up and decided that I would walk a further city block to go to the scooter that I already had working on my phone. Is that my fault? Is that the app’s fault? That’s not the point. The point is that it was too difficult for me to participate in a service that I would’ve liked to use. There’s a very technical component to ESAs as well. You need websites. You need digital marketplace providers. 

There’s a lot of technical components there that need to work in order for any of this conceptual stuff like education choice to happen. You talk a little bit about what payment platforms can look like and what onboard can look like, requests for proposals and things like that. Do you want to talk a little bit about the technical side of things? I know that offline we’ve had discussions about concerns that you’ve had about things that ESA programs weren’t taking seriously enough or potentially couldn’t be taking seriously enough and ramifications that would have, if you just want to talk about… 

Mike McShane: No, I think this is so important. I mean, ultimately, the way parents and vendors too are going to interact with this is through these purchasing platforms. Ideally, I think they’re supposed to look like Venmo, or they’re supposed to look like your online banking where you have some idea of this much money was deposited into your ESA. Here are all the approved providers. I’m moving money from my account to their account. It should be seamless, and it should be quick. You should be able to move money quickly and people should get paid quickly. 

Really, I should have probably said at the beginning, this paper wasn’t just Nicole and I ruminating, but we did a bunch of interviews with people across the spectrum. Some were with people who operate these platforms. Some were with people who used these platforms and definitely frustration was levied at multiple points. But this is one of these examples of their parents aren’t going to give you a bunch of bites of the apple. If they log into this platform and it’s clunky or they don’t know how much money is in their ESA or it doesn’t process their payments, they’re not going to keep trying at it. 

We need to have good customer service on these things if payments get denied or any of that sort of stuff. But this is the crux of what is going on here. I think it’s super important that these platforms work well or easy to use. The way states do this is through the RFP process. They’re putting out RFPs now to various providers who are creating these things. Being really, really thoughtful in those RFPs, really, really reviewing what the capabilities are there, looking at can they scale up, can they do this will be super important 

John Kristof: For sure, for sure will be super important. The last category that you have, and I want to dwell here for a little bit, again, legal also could be its own kind of podcast. 

Mike McShane: It would be better probably to have Nicole on for that one. I’ll be the first to admit that I allowed the leading American legal expert on these questions pretty much free rein to write what she thought was most important there and trusted that it will be right. 

John Kristof: That’s very fair. Maybe I’ll just touch on a little bit of what people can expect when they look at this document, because these are important questions as well. There’s discussion about all these different ways that program creators can set up these programs in ways that will minimize legal confusion and legal risk in the future. There’s always legal challenges from opposition when it comes to school choice programs. Some of it can be avoided just with well-crafted legislation. There’s good discussion about that, as well as how to maybe prepare and deal with some more unavoidable just questions and challenges. 

But that’s a really fruitful discussion as well. I’ll just give one more plug. This is a really helpful report called Implementing K–12 Education Savings Accounts Is Really Simple. It’s on the Manhattan Institute website. Mike and Nicole have an op-ed talking about the report in shorter form on The 74, which, if you’re not familiar, is a very wonderful education news and op-ed platform. Mike, we’ve talked about a lot of different ideas and a lot of different questions that people need to consider when it comes to the next steps in implementing ESAs and creating a choice rich environment in the United States. 

If you were able to give our audience, who presumably are thoroughly in the choice space, if you could give them one takeaway, what would you most hope that they would get from this discussion? 

Mike McShane: I mean, the big thing for me is focus on the things that matter. A lot of the discussion that I’ve seen in the national education commentary or whatever is basically the same old, same old, but just shoving ESAs into it. It’s like, what does this mean for test-based accountability? The same thing, how do we hold these providers accountable and whatever? I think that those are interesting theoretical questions and they will become interesting practical questions perhaps down the road, but those questions are 10 steps ahead of where we are right now and it’s important that we don’t put the cart before the horse. 

While it’s fun for people like me and, John, people like you and I to have these discussions of what would it mean to hold it, platforms need to be built, regulations need to be drafted, terms need to be defined. All of that has to happen before any of those sorts of discussions I think can really take place. I just want the energy to be where it needs to be. Frankly, in some of these cases, we don’t need to be arguing about, is school choice a good idea or a bad idea? Is it just earned? It happened. These states now educating I think north of 7 million kids have passed these laws. They are being implemented. 

If people don’t like it, that’s fine. There’ll be more elections in some years. But continuing to waste our energy, arguing with those people, continuing to waste our energy arguing about irrelevant questions, as I think I said at the top of this, we have 12 to 18 months. Some states are delaying implementation of it. I think Utah has taken a bit more time, so maybe two years, two and a half years to make decisions that will shape the future of the educational choice movement. In the future, I think even a lot of the theoretical debates and whatever, people aren’t going to really be having those as much as they’re going to look at, well, you all said we should do this. 

Seven states, or who knows, by the time this podcast comes out, another one may have done it, went with you and said, okay, cool, we’re doing it and we will be judged. We shall know them by their fruit. We’ll see. Are parents happy in these states? Are schools thriving? Are we seeing more schools, are more people choosing to be enrolled in these programs? That’s what people are going to care about in the future. If these don’t go well, if poor decisions are made, if these platforms are terrible, if we can’t onboard parents, if any of that stuff happens, we can write op-eds until our fingers fall off, ain’t going to matter. 

What’s going to matter is whether these programs succeed or fail. I think the biggest thing for me is to just try and impress upon the educational choice movement as much as possible the gravity of the situation. The opportunity is huge, but it’s perilous. We can secure a generational victory for educational choice and for millions of families across America, or we can cause irreparable damage to causes that we hold dear. It’s an incredibly important time. It’s a huge opportunity, and we’ve got to be serious about it, focused on it, and take advantage of it. 

John Kristof: Yeah, that’s beautifully said. It’s go time essentially. 

Mike McShane: You basically said that in so many fewer words than I did, but yes. 

John Kristof: No, what you said was great. The time is now. Sure, legislative victories are exciting. They’re eye-catching. They’re satisfying because they’re so definite. We have accomplished something. The bill has been signed. It’s very definite and you can celebrate that. It’s a lot harder to maybe have the same emotions about implementing something and maintaining something because there is less of a defined end road. And yet, I mean, as this discussion I think really shows, that’s actually the most important thing. That is what a choice rich United States is going to require. 

For all the energy we’ve had with excitement about the legislative side of things, we need at least as much, if not more to the implementation side of things. With that, I just encourage everyone to go take a look at the report. If you’re in the choice space, think about how you can help solve one of these questions or address some of these concerns in your state or just for the movement in general. It’s go time, as I’d said before. Mike, thank you so much for your work on this report, first of all, and then also just for chatting with me today about it on the podcast. Thank you to all of our listeners. 

Thank you to Jacob Vinson, our wonderful podcast producer and art director at EdChoice. He does great work with literally everything he does, including making us sound coherent. Until then, keep up the good work everyone in the school choice space, and we will see you on the next edition of EdChoice Chats.